Increase In The Cost of Home Ownership
According to a study completed by RBC, the cost of owning a single family, detached home in Canada has increased to about 43% of a family’s before tax income. Although this is up by about 1.2% over the previous quarter it is still not as high as the 52% we saw in the spring of 2008. The record high was 57% which was reached in the second quarter of 1990. RBC goes on to say the increase is due to a slight rise in mortgage rates combined with an increase in the price of houses.
The Canadian Real Estate Association also released some stats on home prices across Canada. They found house prices are up over 20% compared to October of last year resulting in the largest year over year increase in 20 years. Part of what is driving this increase is a shortage of supply in the housing market and record low interest rates. The increased demand created by the interest rates is not being met due to a decrease in housing supplies which results in bidding wars and increased prices. This is great if you are a seller, but extremely discouraging if you are a buyer.
Phil Soper from Royal LePage feels we will see the inventory problem ease in the spring of 2010 as more families list their homes to coincide with the end of the school year.
If you have been looking for a property, but have been unsuccessful in purchasing don’t despair. It is common in any real estate market to not get the first house you bid on (or sometimes the 2nd or 3rd). Be sure to stick with your original budget and do not fall into the bidding war frenzy. Also avoid making an offer without a financing clause in an effort to make your offer more attractive….you have been pre-approved, but your house hasn’t. I have seen too many cases where the lender has refused to lend on a specific property for various reasons and the home owner was stuck with a house that no lenders were willing to lend on. In the end a mortgage broker can usually find a lender willing to take on the risk, but it comes at a much higher interest rate.
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